General Motors (GM) and Daewoo motors entered a Joint Venture (JV) in 1986 to manufacture a car in Korea for sales in the US, based on GM’s design, which was considered the best product that could be offered by Germany, Korea, and the US. From this venture, GM and Daewoo had different expectations and goals. GM wanted Korea’s low-wage workforce to build a low-cost car to compete for the with the Japanese car industry, whereas, Daewoo’s goals were to become a major car manufacturing company that wanted to go globally. The mutual car created by Daewoo and GM did not bring success for either company so they decided to renegotiate their strategies and goals. The issue for both companies was that sales had dropped from 39% to 15%, and GM and Daewoo were not pleased with their performance in Korea and America. GM and Daewoo did meet their pectations, because to build a stateless or multinational car was harder than they thought. Neither party fully assessed and understood thic other’s strengths and weaknesses, neither did tlicy understand the other’s corporate culture. GM’s methodical extended decision making did not suit well Daewoo, where decisions were made quickly to respond to the market conditions. The unexpected changes in the market conditions could have been managed if GM and Daewoo would have worked toward preventing the potential shortfalls, cooperating, and sharing their market assumptions in the car industry, as well their strategies on how to keep up with their competitors. The GM and Daewoo’s JV shortfalls were attributed to endogenous and cxogenous factors that had a negative influence on the IV. At the endogenous level, both companies had poor cooperation, for instance, GM refused Daewoo’s request to manufacture newer car models to keep up with the rivals that were introducing the cars with new technology in the market. From the exogenous point of view, the market conditions in Korea changed, the Korean Won rose higher than the US dollar which leads to a prospered country. higher
1. In your own words explain why GM and Daewoo Joint Venture was a failure?
2. What GM and Daewoo should have done for this alliance to have success?